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Let's make a dual

Entrepreneur, Nov, 2004 by Jennifer Pellet

LET'S MAKE A DUAL: If fear of losing control of your company is the only thing stopping you from an IPO, then dual-class ownership probably seconds like a great deal. In this public company ownership structure--which has gained ex-posure since Google announced plans to use it in is public offering--founders receive "supershare" stocks that carry multiple votes, while the shares sold to the public carry one vote each, Typically, a dual-share system s structured so the founders retain a majority voting power, thereby retaining operational control and insulating the firm from takeover attempts.

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But control bears a hefty price tag. "The market places a real discount on firms like this," says Andrew Metrick, associate professor of finance at the University of Pennsylvania's Wharton School. "To retain control, you could be looking at a 20 to 30 percent lower valuation."

Is it worth the sacrifice? "You have to ask yourself what control is worth to you in dollar terms," advises Metrick. He notes that investment bankers invariably discourage the structure less, as in Google's case, company founders rate near-celebrity status. "It brings the value down, and It's, one more thing for them to have to explain to the [investing public]"

JENNIFER PELLET (jpellets@aol.com) is a freelance writer in New York City specializing in business and finance.

Business Services Industry

Let's make a dual

Entrepreneur, Nov, 2004 by Jennifer Pellet

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